Recovery, such as it is, appears to be a repeat of the lopsided growth of the Bush years, with corporate profits rebounding and jobs and incomes lagging.Paul Krugman recently pointed to an interesting (albeit superficial) article about Japan that indicates how long-term high levels of unemployment for young adults can distort a society. That's something to avoid, if possible. Optimists argue that we must do more to reboot the economy and generate jobs before long-term unemployment becomes structural or, even more optimistically, before those opposed to stimulus spending can argue that there's no point because a @10% unemployment rate has become a structural issue that we must accept and live with.
But we are dealing with real world changes. We've exported our manufacturing base and expertise, such that formerly huge domestic industries are a shadow of their former selves. (Consider, for example, the domestic furniture and textile industries). We're dealing with an environment in which manufacturing jobs that once paid a middle class wage to young workers are now paying... not much better than running a cash register at Wal-Mart. Even if you believe the skill sets are similar, and that the only reason manufacturing jobs were better paid is the influence of "evil unions", you cannot revive the domestic consumer economy in an environment in which workers are being paid less and are working fewer hours. And yes, the concept of quickly reviving the economy through stimulus spending anticipates that the consumer economy will revive. (The mixed message: Save money, oh you spendthrift Americans, but simultaneously borrow and spend.)
Via Atrios comes a look at employer expectations in the new economy. In the eyes of the Wall Street Journal, it appears that skilled workers should be begging for scraps, not demanding decent wages. Workers should be eager to apply for jobs beneath their skill set, and should not expect job security, but employers should feel free to reject workers as overqualified.
Many of the longest-term unemployed may already be permanently displaced from the job market. Those who worked in industries that have collapsed, in which innovation has reduced or eliminated the demand for their skills, or in which employers find it advantageous to bring in younger, often lower-paid workers are not likely to find well-paying work in the new economy. Even with stimulus spending. I hate to be a pessimist, and I do not mean this as an argument against another significant stimulus bill, but these structural changes in the job market have been developing for decades and they're real.
It's been easy for other parts of the country to point to the rust belt, or similarly depressed regions, and argue that the residents of those regions are flawed, or that there's a magic trick that the government could pull off - cutting taxes, reducing regulations, offering subsidies - that would attract new jobs and industries to their states. But is it that difficult to see that the structural changes that occurred in the steel and auto industries, or the aforementioned furniture and textile industries, are not going to vanish? For the most part, factories aren't coming back. And the few that do will require far fewer workers than the factories of past generations and are likely to pay significantly lower wages. Nobody finds that surprising for the auto industry, so why do so many act like the past several governors of Michigan, plug their ears and hum when it's pointed out that the net effect of this recession has been to push a significant number of other industries in the same direction?
The entire world seems to be focused on the American consumer as the solution to the global financial crisis. When American consumers start spending again, the gears of international commerce will start to turn and, as they accelerate, everybody will once again be rolling in money. But perhaps it's time for other nations to recognize that it's not likely to happen, and certainly not likely to happen any time soon. And for our own political leaders to start paving the way for a future in which the economy rests on a more sound foundation than consumer spending.
Yes, change is scary. But change is not only coming, it has arrived.